The regular deadline to submit a tax return is April 15, but this year, filers will get a little extra time. Because April 15 falls on out a Saturday, and because Emancipation Day falls out on a Sunday (April 16) and is being pushed to Monday (April 17), you have until April 18, 2017 to submit your 2016 tax return.
That said, there will still be plenty of us who inevitably don't have our taxes ready by that time. If this happens to you, it pays to file for a tax extension. The IRS lets taxpayers who need more time to prepare their returns apply for a six-month extension. You can file for a federal income tax extension online, and as long as you complete your form on time, your request will be granted. However, keep in mind that extending your tax filing deadline may not help if you owe money to the IRS and aren't able to pay right away.
Why file an extension?
Filing an incorrect return puts you at a higher risk of a tax audit. Many people require tax extensions because they're waiting on 1099s or other essential tax forms to arrive in the mail. Keep in mind, however, that any time a company or entity issues a 1099, the IRS gets a copy, and if your records don't match what the IRS is seeing, your tax return could be flagged. That's why it's generally better to wait until you have the right information to file your taxes rather than risk submitting an erroneous return.
Of course, it could be that you have all the forms and information you need, and you simply sat on it for too long. Thankfully, you can still get away with procrastinating as long as you file that extension on time.
What a tax extension can't do
While a tax extension will give you six extra months to submit your return, it won't help you if you owe taxes but find yourself unable to pay. Rather, you're required to pay the IRS what you owe by the April 18 deadline, and failing to do so could result in some pretty steep penalties. Specifically, you could be subject to a late payment penalty of 0.5% of the amount you owe per month until you pay off your balance in full, up to a maximum of 25%. If your sole reason for applying for an extension is to buy yourself extra time to pay what you owe, you're better off requesting an installment plan -- the IRS often grants these for tax filers who can't pay their balances right away.
Don't be late in filing that extension
The beauty of the tax extension is that it gives you more time to file your taxes, but don't be late in filing that extension itself. If you fail to request an extension by April 18, or if you fail to submit your return by the extension deadline of Oct. 16, 2017, you'll face a penalty for filing late that amounts to 5% of whatever taxes you owe per month, up to a maximum of 25%. If you file your return more than 60 days past its due date and owe money on your taxes, you'll face a minimum penalty of $135 or 100% of your unpaid taxes – whichever amount is smaller.
Keep in mind that the penalty for filing your taxes late can be 10 times higher than the penalty for paying them late. If you're unable to pay your taxes right away, you're better off filing on time and paying late as opposed to not filing altogether.
Finally, if you do file for an extension, be sure to get your return in by the time those six months are up. Once the extension deadline of Oct. 16 passes, the IRS will no longer accept electronic returns, which means you'll need to head over to the post office to submit your 2016 forms.
The Motley Fool has a disclosure policy.